Michigan Estate Planning Blog

Intellectual Property and Selling Your Business

In every beginning there is an end, and in every planning for the beginning of your company there should also be a plan for the end. Whether all goes well or all goes south, how does your business fit into your plan and how might it fit into your overall assets or estate? That is a heady issue, but increasingly in this information economy the most vital aspect is intellectual property. Have you planned to structure the sale of both your business and your intellectual property? To what degree are the products of your company products of an intellectual property? Who owns the property, you or the company? Just as likely, is it possible that a previous employer has claim to your intellectual property? Heed some advice given in a recent Forbes article titled “Start With The End In Mind: Four Must-Dos For Intellectual Property.” The simple fact is that with a personal business, so much of your own life – your blood, sweat, tears and ideas – go into the business. Accordingly, that planning for the business is truly a bit of life planning for yourself. So how can you protect your intellectual property and what is your property in the first place? And, if you are already at the point of sale, how do you go about protecting and valuing that intellectual property?

Reference:  Forbes (June 9, 2014) “Start With The End In Mind: Four Must-Dos For Intellectual Property”

For more information, see www. jerryreiflawyer.com

Planning Your Family Business Legacy

Sometimes, passing along your assets to the next generation is simply a matter of passing them along. You just let the gift and the potential represented by that gift be your legacy (emphasis on the “sometimes”). However, when the asset is a business, it is rarely that simple. A business is not merely a thing. No, a business is a mindset, an activity and, oftentimes, even a lifestyle. It can get complicated. If your legacy is the family business, then with great responsibility comes the need for equally careful planning, preparation and dialogue. Because every business is different, as every family is different and every individual is unique, what is right for a family business is something to be figured out and understood. That said, businesses have been coming and going for generations. Some have transferred successfully and others less so. Consequently, there are some tried and true strategies to consider when planning for your own family business succession. Whether your objective is a sale, windup or succession, Forbes has provided a practical roadmap in a recent article titled “Six Steps For Making Your Business A Family Legacy.” Here are the six steps by heading alone: 1. Give the family a reason to continue the family business 2. Develop a management team 3. Structure a business succession plan 4. Fund the business succession plan 5. Wealth replacement for other family members 6. Have a successful business So what is right for you, your family and your business? I recommend reading the original article and then consulting with your team of professional advisors. Your attorney, accountant, financial planner and insurance agent will each bring a valuable and unique skill set to the table.

Reference: Forbes (February 3, 2014) “Six Steps For Making Your Business A Family Legacy”

For more information, see www.jerryreiflawyer.com

Planning For Things To Turn Toward Chaos

If you are a small business owner, then you simply cannot have your greatest personal asset, the greatest family asset, and the activity you are most proud of eroded, chipped away or swallowed whole by litigants or creditors. You need a plan to protect the business as an asset. Whenever an asset is important it is also worth your time to protect it. Businesses are a unique kind of asset. Protecting them requires a certain kind of thinking and planning. Unfortunately, most business owners simply have not done their due diligence with asset protection planning. However, even if you’re in the know, it is worth reading the recent Private Wealth article addressing this important topic, “Asset Protection For Business Owners.” Asset protection is always about assessing the risks to the asset. The primary risks to any successful business are litigants and creditors seeking a piece of the pie. No one really likes or trusts creditors, but far and away it is litigation that can take down a thriving operation. It doesn’t even have to be a “legitimate” lawsuit if it's litigation against the business itself. While we are at it, let’s not forget about personal litigation or divorce. Nevertheless, structuring the assets of the business and the business itself is a tremendously powerful way of shielding you, your family, and the wealth tied up in the business from being taken down. But here’s the rub: a plan in place is often a saving grace where the plan left on the chalkboard is always just wishful thinking. Here is a funny bit of math the article pulls out of a recent study by Price Associates: “About 89.7% of these business owners said they are concerned about such lawsuits, but only 26.9% have an asset-protection plan.” Why so few? Whatever the source of risk to the business as an asset, there are a wide variety of strategies that can be employed to limit or eliminate the risk. A powerful protection might even stop a suit dead in its tracks long before a plaintiff engages the court! To do the most good the plan must be developed with all the variables in mind and by a seasoned professional. Above all, however, this essential planning must be completed before it’s really needed. So don’t put it off and leave your business at risk.

Reference: Private Wealth (March 7, 2014) “Asset Protection For Business Owners”

For more information, see www.jerryreiflawyer.com

Planning For Things To Turn Toward Chaos

In science we refer to the rule of entropy, roughly: things tend toward chaos. It turns out that the same principal holds true for businesses. Chaos in business is litigation. If you are a small business owner, then you simply cannot have your greatest personal asset, the greatest family asset, and the activity you are most proud of eroded, chipped away or swallowed whole by litigants or creditors. You need a plan to protect the business as an asset. Whenever an asset is important it is also worth your time to protect it. Businesses are a unique kind of asset. Protecting them requires a certain kind of thinking and planning. Unfortunately, most business owners simply have not done their due diligence with asset protection planning. However, even if you’re in the know, it is worth reading the recent Private Wealth article addressing this important topic, “Asset Protection For Business Owners.” Asset protection is always about assessing the risks to the asset. The primary risks to any successful business are litigants and creditors seeking a piece of the pie. No one really likes or trusts creditors, but far and away it is litigation that can take down a thriving operation. It doesn’t even have to be a “legitimate” lawsuit if it's litigation against the business itself. While we are at it, let’s not forget about personal litigation or divorce. Nevertheless, structuring the assets of the business and the business itself is a tremendously powerful way of shielding you, your family, and the wealth tied up in the business from being taken down. But here’s the rub: a plan in place is often a saving grace where the plan left on the chalkboard is always just wishful thinking. Here is a funny bit of math the article pulls out of a recent study by Price Associates: “About 89.7% of these business owners said they are concerned about such lawsuits, but only 26.9% have an asset-protection plan.” Why so few? Whatever the source of risk to the business as an asset, there are a wide variety of strategies that can be employed to limit or eliminate the risk. A powerful protection might even stop a suit dead in its tracks long before a plaintiff engages the court! To do the most good the plan must be developed with all the variables in mind and by a seasoned professional. Above all, however, this essential planning must be completed before it’s really needed. So don’t put it off and leave your business at risk.

Reference: Private Wealth (March 7, 2014) “Asset Protection For Business Owners”

For more information, see www.jerryreiflawyer.com

Related articles

Estate Planning And Conservation

Corporations, Key Facts And Headaches To Avoid

Doing business is an activity. If you own a business, or are set to inherit a business, it is vital to know that you can continue to do business. Either way, remember to determine whether the business “structure” is the most appropriate. There is a significant difference between the C Corporation and the S Corporation. Fortunately, Forbes helps clarify the distinction in an article titled “Key Facts About Corporations, S Elections & Buy-Sell Agreements.” If nothing else, it might dissuade you from a “corporation” at all. Essentially, a corporation is always a corporation, but they do come in two flavors based on how you will be taxed. With an S corporation, the corporation will be “disregarded” and your personal profits from it will be taxed to you personally. On the other hand, a C corporation (generally larger in size) will be taxed as a separate entity all on its own before and in addition to any tax paid by owners. When you are doing business this taxation is clearly important (you hope to make some money, no?). However, when you are planning for the future and longevity of the business this is no less important. Perhaps some different business structures are worth considering. For example, you might jump for the newer, stylish and (maybe) more agile LLC or Limited Liability Company. If you have a corporation, then make sure you have a buy-sell agreement. The buy-sell agreement allows shareholders to agree how their shares will pass if one or more of them become disabled, retire or die. Otherwise, letting shares loose or in the wrong hands can even threaten the tax structure, never mind the health and longevity of the business in all regards. Then again, maybe you have a different plan for how ownership should transition. These are a few key facts worth knowing, and if you own or may soon inherit a business then there is much to learn about business ownership and business structure. There are many more key facts to know, and maybe there is work to be done in restructuring the business itself.

Reference: Forbes (March 18, 2014) “Key Facts About Corporations, S Elections & Buy-Sell Agreements”

For more information, see www.jerryreiflawyer.com

Do You Know The True Value Of Your Business?

A business is a tricky thing to plan. First, the business is a thing in motion rather than an asset at rest. And second, businesses are a hard asset to value appropriately. Does your retirement plan and maybe your estate plan for your heirs rely upon the business? Well then, do you know what your business is actually worth? For a sobering problem many business owners end up facing when it comes to valuing their business, be sure to read a recent article in Forbes titled “Is Your Business Worth As Much As You Think? Many Aren't.” At the core of the article is an interpretation of findings recently released by Pepperdine University in its 2014 Capital Markets Report. The key finding: buyers and sellers of businesses cannot agree on how much they are worth. Instead of negotiating back and forth to an eventual middle ground value, about 1 in 3 engagements fell through without any sale at all. Now, keep in mind that it is always in the nature of high-pressure deals to come to such divisive and decisive ends. However, all the same there is a lesson to learn when so much is at stake. What is your business worth and how do you prove it? How do you approach the sale and how do you structure your assets thereafter? This is a complex transaction. Putting it into the proper context and value is essential both in the beginning and the end of the process.

Reference: Forbes (March 2, 2014) “Is Your Business Worth As Much As You Think? Many Aren't”

For more information, see www.jerryreiflawyer.com

The Aftermath Of Selling The Business

Selling your business is no easy task, nor is it a quick one. At some point an agreement is presented and, if accepted, the changes can happen as fast as the pen can sign. Nevertheless, in the aftermath of the sale any deal can turn acrimonious. If you and your family are considering the sale of the family business, and maybe considering an actual offer on the table, there is some business thinking that should enter the mix. This is especially true when it is your exit from the business. Consider the warning alarm sounded by Forbes in a recent article titled “You've Finally Sold Your Business: Now The Ugly Negotiations Really Begin.” It is in the interests of most sellers to make the price of the business dependent upon its future success. Consequently, there is some money upfront with a promise for full payment upon full performance. Sometimes, the idea is just to stagger full payments for the sake of financing. Plans like these can give both buyer and seller the best of both worlds, or it can mean a world of litigation when there is a disagreement or things go wrong. Remember, when planning for the sale of the family business, it really does matter just how you sell the business and it pays to be aware of the issues in advance. Read the original article for a number of common scenarios. Finally, do not forget that the family business is likely an important part of your estate, too. More often than not, the family business is your estate. If that is the case, then be mindful to structure the sale in accordance with the family needs.

Reference: Forbes (February 21, 2014) “You've Finally Sold Your Business: Now The Ugly Negotiations Really Begin”

For more information, see www.jerryreiflawyer.com

Prepping Your Business For Sale Mid-Michigan

Building the business is about a lot of things. First and foremost, there is that pesky reality of getting out there and doing things: getting to market, cornering the market and, eventually, turning a profit. Little surprise, then, selling the business takes a lot of doing too. After all, you are actually planning for yourself, the lives of your loved ones, and your loyal employees. Done right, a business succession or sale requires the ability to ask the right questions, let alone have the right answers. And there is no shortage of good questions to ask of yourself, your company, your family, and of course, the potential buyer. Fortunately, a recent article in The Business Journals titled “Key questions to ask when planning to sell your business” will give you a head start on the questions, but you must supply the answers. While you can tailor the questions to fit your unique circumstances, here are the four questions the author of the article thinks you need to ponder: 1. Is seller financing feasible in accomplishing my future endeavors? 2. How involved do I really plan on being post-sale? 3. How should I mitigate the emotional connection to my business and my employees? 4. Should I sign that non-compete? Obviously, these four questions are not all-inclusive. However, they are a good start. In the end, the most prudent course of action may be to gather counsel from all of those who have a stake in what may be one of the most significant life event they and you may ever face. Consider soliciting the input of your loved ones, your leadership team, and your employees. Then, once you have determined the best outcome for all concerned, meet with your professional advisors to help you get there.

Reference: The Business Journals (December 2, 2013) “Key questions to ask when planning to sell your business”

For more information, see www.jerryreiflawyer.com

Prepping Your Business For Sale Saginaw, Michigan

Building the business is about a lot of things. First and foremost, there is that pesky reality of getting out there and doing things: getting to market, cornering the market and, eventually, turning a profit. Little surprise, then, selling the business takes a lot of doing too. After all, you are actually planning for yourself, the lives of your loved ones, and your loyal employees. Done right, a business succession or sale requires the ability to ask the right questions, let alone have the right answers. And there is no shortage of good questions to ask of yourself, your company, your family, and of course, the potential buyer. Fortunately, a recent article in The Business Journals titled “Key questions to ask when planning to sell your business” will give you a head start on the questions, but you must supply the answers. While you can tailor the questions to fit your unique circumstances, here are the four questions the author of the article thinks you need to ponder: 1. Is seller financing feasible in accomplishing my future endeavors? 2. How involved do I really plan on being post-sale? 3. How should I mitigate the emotional connection to my business and my employees? 4. Should I sign that non-compete? Obviously, these four questions are not all-inclusive. However, they are a good start. In the end, the most prudent course of action may be to gather counsel from all of those who have a stake in what may be one of the most significant life event they and you may ever face. Consider soliciting the input of your loved ones, your leadership team, and your employees. Then, once you have determined the best outcome for all concerned, meet with your professional advisors to help you get there.

Reference: The Business Journals (December 2, 2013) “Key questions to ask when planning to sell your business”

For more information, see www.jerryreiflawyer.com

Successful Family Business Succession Tips Saginaw, Michigan

Planning for your estate and planning for your business are one and the same. When you are a family business owner looking to pass the torch, the business is at once your greatest asset and likely the center of the family's wellbeing – but in another important sense planning for a business is not at all the same. You cannot afford to mess this up. Succession planning is unique because business is business, and so a successful succession is a careful one. There are a great number of moving pieces to your business and to your family. Nevertheless, there are some basic guiding principles to help tie it all together. A recent article in The Business Journals offers “5 tips for a successful family succession.” While you should consult the original article for the details, here are the “five tips”: 1. Be Transparent 2. Clarify Ownership Values 3. Plan Ahead 4. Consider Financial and Tax Ramifications 5. Stay Connected Essentially, respect the family as family and the business as business. Family is here to stay and everyone has to come out on top, while the business requires leadership, sharp decision-making, and a business mindset. It pays dividends to work with the family and maintain transparency regarding your plans to make the “handoff” and their plans to receive. Ownership is a big issue to clarify, since ownership and a voice in the company straddles that fine line between merely family-owner and head-honcho decision-maker. These may be roles some loved ones are designed to occupy. What are the issues that most directly affect you and your family? How can or will you work through them to pass on the business? These are not simple questions by any stretch. More to the point, succession is more a process of working out the solution than just offering up the plan. You might say that succession is always a process unique to each family and family business, but one during which it is essential to have a steady hand guiding the process.

Reference: The Business Journals (December 9, 2013) “5 tips for a successful family succession”

For more information, see www.jerryreiflawyer.com

 

Successful Family Business Succession Tips Mid-Michigan

Planning for your estate and planning for your business are one and the same. When you are a family business owner looking to pass the torch, the business is at once your greatest asset and likely the center of the family's wellbeing – but in another important sense planning for a business is not at all the same. You cannot afford to mess this up. Succession planning is unique because business is business, and so a successful succession is a careful one. There are a great number of moving pieces to your business and to your family. Nevertheless, there are some basic guiding principles to help tie it all together. A recent article in The Business Journals offers “5 tips for a successful family succession.” While you should consult the original article for the details, here are the “five tips”: 1. Be Transparent 2. Clarify Ownership Values 3. Plan Ahead 4. Consider Financial and Tax Ramifications 5. Stay Connected Essentially, respect the family as family and the business as business. Family is here to stay and everyone has to come out on top, while the business requires leadership, sharp decision-making, and a business mindset. It pays dividends to work with the family and maintain transparency regarding your plans to make the “handoff” and their plans to receive. Ownership is a big issue to clarify, since ownership and a voice in the company straddles that fine line between merely family-owner and head-honcho decision-maker. These may be roles some loved ones are designed to occupy. What are the issues that most directly affect you and your family? How can or will you work through them to pass on the business? These are not simple questions by any stretch. More to the point, succession is more a process of working out the solution than just offering up the plan. You might say that succession is always a process unique to each family and family business, but one during which it is essential to have a steady hand guiding the process.

Reference: The Business Journals (December 9, 2013) “5 tips for a successful family succession”

For more information, see www.jerryreiflawyer.com

 

Successful Family Business Succession Tips Saginaw, MI

Planning for your estate and planning for your business are one and the same. When you are a family business owner looking to pass the torch, the business is at once your greatest asset and likely the center of the family's wellbeing – but in another important sense planning for a business is not at all the same. You cannot afford to mess this up. Succession planning is unique because business is business, and so a successful succession is a careful one. There are a great number of moving pieces to your business and to your family. Nevertheless, there are some basic guiding principles to help tie it all together. A recent article in The Business Journals offers “5 tips for a successful family succession.” While you should consult the original article for the details, here are the “five tips”: 1. Be Transparent 2. Clarify Ownership Values 3. Plan Ahead 4. Consider Financial and Tax Ramifications 5. Stay Connected Essentially, respect the family as family and the business as business. Family is here to stay and everyone has to come out on top, while the business requires leadership, sharp decision-making, and a business mindset. It pays dividends to work with the family and maintain transparency regarding your plans to make the “handoff” and their plans to receive. Ownership is a big issue to clarify, since ownership and a voice in the company straddles that fine line between merely family-owner and head-honcho decision-maker. These may be roles some loved ones are designed to occupy. What are the issues that most directly affect you and your family? How can or will you work through them to pass on the business? These are not simple questions by any stretch. More to the point, succession is more a process of working out the solution than just offering up the plan. You might say that succession is always a process unique to each family and family business, but one during which it is essential to have a steady hand guiding the process.

Reference: The Business Journals (December 9, 2013) “5 tips for a successful family succession”

For more information, see www.jerryreiflawyer.com

Leaving Your Business By Design Saginaw, MI

If you are a small business person, what will your last day at work be like? More to the point, what will your last day at work mean to the business you created? The answer hinges on whether your exit will be by design or by default. To exit your business by design requires coordinating your personal estate with the estate of the business. Oftentimes the two are intertwined. Ask yourself the question recently posed in the title of a recent Forbes article: “How Will You Leave Your Small Business The Last Time?” Will you sell it? Apparently as many as a third of business owners surveyed by the author planned to do so. However, the business brokerage industry reports a successful sales record of not much more than 20%. Going to pass it on to the next generation? Some 14% of survey respondents said they were, but only roughly 30% of family businesses actually continue to the next generation. In either case, the numbers simply do not add up well for casual business exit planning. Just as you have worked hard to build your business, it seems you will need to work hard to successfully leave it. Accordingly, plan now for that last day or risk losing your investment by default.

Reference: Forbes (November 4, 2013) “How Will You Leave Your Small Business The Last Time?”

For more information, see www.jerryreiflawyer.com

Leaving Your Business By Design Mid-Michigan

If you are a small business person, what will your last day at work be like? More to the point, what will your last day at work mean to the business you created? The answer hinges on whether your exit will be by design or by default. To exit your business by design requires coordinating your personal estate with the estate of the business. Oftentimes the two are intertwined. Ask yourself the question recently posed in the title of a recent Forbes article: “How Will You Leave Your Small Business The Last Time?” Will you sell it? Apparently as many as a third of business owners surveyed by the author planned to do so. However, the business brokerage industry reports a successful sales record of not much more than 20%. Going to pass it on to the next generation? Some 14% of survey respondents said they were, but only roughly 30% of family businesses actually continue to the next generation. In either case, the numbers simply do not add up well for casual business exit planning. Just as you have worked hard to build your business, it seems you will need to work hard to successfully leave it. Accordingly, plan now for that last day or risk losing your investment by default.

Reference: Forbes (November 4, 2013) “How Will You Leave Your Small Business The Last Time?”

For more information, see www.jerryreiflawyer.com

Making The Most Of Your Business Sale Saginaw, MI

It is so easy to pour your life into the business. You may even regard the business as your life, especially if you love the work and it is a family business to boot. Unfortunately, for many a business owner the life after the business seldom gets the attention and planning it requires. If you might wish to sell your business in the future for the good of your future life, then there is much planning to do even now. Since the business is such an integral part of your personal wealth, and perhaps also of your family wealth, planning time is time well invested. Thinking about, planning for, and knowing when to pull the trigger on the sale is just good life-planning. It can be tricky, too. Forbes gave a few tidbits of wisdom on the topic of maximizing your business sale and the ensuing wealth in a recent article titled “How Business Owners Maximize Personal Wealth Selling Their Companies.” The article provides three steps worthy of consideration. Essentially, you must plan to put the business in the right place to be bought, plan to put the family and yourself in the right place to sell, and plan to come to the negotiation table ready to get what you need. Because your business, your family and your life goals are unique, be sure you “measure twice (at least) and cut once” when it comes to this major event. There are no mulligans you can use once the ink is dry and the money has changed hands regarding your business sale.

Reference: Forbes (October 1, 2013) “How Business Owners Maximize Personal Wealth Selling Their Companies”

For more information, see www.jerryreiflawyer.com

 

 

Wisdom To Protect Your Windfall Mid-Michigan

The bigger the target the easier and more appealing the target. Sad, but true. Legally speaking, every financial gain brings with it a new amount of risk. Oftentimes, the legal risk is directly proportionate to the size of the financial gain. So, if you have come into a sudden amount of wealth – whether by windfall, asset sale, or inheritance, etc. – then now is also the time for some immediate asset protection planning. Structuring your ownership and protection of those assets is an important step you cannot afford to overlook. However, such structuring and protecting can get complicated. Much of what you can do (and cannot do) hinges on the very nature of the assets and the risks themselves. Thankfully, there are some common strategies worth exploring. Forbes recently offered six proven asset protection strategies to shield both you and your important assets. The article, titled “6 Asset Protection Strategies To Shield Your Wealth,” is worth a read. If you are pressed for time, here is a capsule summary: 1. Increase liability insurance: insurance is a product to solve risk, after all, and liabilities are exactly the kind of lightning rod to be struck. 2. Separate assets: shared assets, with a spouse or family members, means doubling the risk on those assets, so separating them into your own accounts (or entirely out of your estate and control) can shield them. 3. Consider a business structure: the business exists as an entity that is not “you” and its liabilities are not your liabilities, so owning special assets (like rental properties) through an LLC or corporation will work to shield you and your individual assets.

Reference: Forbes (October 9, 2013) “6 Asset Protection Strategies To Shield Your Wealth”

For more information, see www.jerryreiflawyer.com

 

Key Considerations When Selling Your Business Saginaw, MI

Now that you have built a successful business, are you ready to sell it? You only get one shot to get it right. Best to measure twice and cut once.

Your business may have been years or decades in the making. Selling it, on the other hand, can be tricky. Forbes recent took up this topic in an article “The 5 Things Entrepreneurs Must Know When Selling A Business.”

So what are these truths?

1. You Really Don’t Matter. Ouch! Buyers simply want to buy a business that is profitable in-and-of itself. When you, the owner, are not the greatest asset of the business, then the business is generally considered to be more attractive.
2. Buyers Know Which Employees They Will Keep. That is right. Over the years, you may have hired family and friends as employees. While you value them, the buyer may not. In fact, the buyer likely has his or her own family and friends to employ.
3. Even Good Debt May Catch Up to You. Debt is debt. The red and black ink on your business ledger can get in the way, especially if it is not structured properly.
4. Handshakes and Signatures May Do You In. Your business wheeling and dealing may kill the deal. In other words, the buyer will have to contend with those agreements, promises, and sheer liabilities you have incurred building your business. This is commonly a problem when “agreements” were done on the fly, never reduced to writing or barely a handshake. A disadvantageous agreement penned in black and white can be as damaging as a solid agreement can be lucrative. It is the proverbial two-edged sword.
5. Your Business May Be Your Accountant’s Biggest Annuity. Not only may family and friends get their paycheck under your signature, but so do various professional advisors. This can create (potential) conflicts of interest. Just be alert. If outside advisors find their “rice bowls” threatened, then they may drag their feet or at least be less than helpful. 

The original article goes into much more detail, with even a bit more brow-beating.

Bottom line: the sale of your business is fraught with many challenges. Proper planning is key to navigating them successfully. 

Reference: Forbes (September 3, 2013) “The 5 Things Entrepreneurs Must Know When Selling A Business”

For more information, see www.jerryreiflawyer.com

 

Wisdom To Protect Your Windfall Saginaw, MI

The bigger the target the easier and more appealing the target. Sad, but true. Legally speaking, every financial gain brings with it a new amount of risk. Oftentimes, the legal risk is directly proportionate to the size of the financial gain. So, if you have come into a sudden amount of wealth – whether by windfall, asset sale, or inheritance, etc. – then now is also the time for some immediate asset protection planning. Structuring your ownership and protection of those assets is an important step you cannot afford to overlook. However, such structuring and protecting can get complicated. Much of what you can do (and cannot do) hinges on the very nature of the assets and the risks themselves. Thankfully, there are some common strategies worth exploring. Forbes recently offered six proven asset protection strategies to shield both you and your important assets. The article, titled “6 Asset Protection Strategies To Shield Your Wealth,” is worth a read. If you are pressed for time, here is a capsule summary: 1. Increase liability insurance: insurance is a product to solve risk, after all, and liabilities are exactly the kind of lightning rod to be struck. 2. Separate assets: shared assets, with a spouse or family members, means doubling the risk on those assets, so separating them into your own accounts (or entirely out of your estate and control) can shield them. 3. Consider a business structure: the business exists as an entity that is not “you” and its liabilities are not your liabilities, so owning special assets (like rental properties) through an LLC or corporation will work to shield you and your individual assets.

Reference: Forbes (October 9, 2013) “6 Asset Protection Strategies To Shield Your Wealth”

For more information, see www.jerryreiflawyer.com

 

Key Considerations When Selling Your Business Mid-Michigan

Now that you have built a successful business, are you ready to sell it? You only get one shot to get it right. Best to measure twice and cut once. Your business may have been years or decades in the making. Selling it, on the other hand, can be tricky. Forbes recent took up this topic in an article “The 5 Things Entrepreneurs Must Know When Selling A Business.” So what are these truths? 1. You Really Don’t Matter. Ouch! Buyers simply want to buy a business that is profitable in-and-of itself. When you, the owner, are not the greatest asset of the business, then the business is generally considered to be more attractive. 2. Buyers Know Which Employees They Will Keep. That is right. Over the years, you may have hired family and friends as employees. While you value them, the buyer may not. In fact, the buyer likely has his or her own family and friends to employ. 3. Even Good Debt May Catch Up to You. Debt is debt. The red and black ink on your business ledger can get in the way, especially if it is not structured properly. 4. Handshakes and Signatures May Do You In. Your business wheeling and dealing may kill the deal. In other words, the buyer will have to contend with those agreements, promises, and sheer liabilities you have incurred building your business. This is commonly a problem when “agreements” were done on the fly, never reduced to writing or barely a handshake. A disadvantageous agreement penned in black and white can be as damaging as a solid agreement can be lucrative. It is the proverbial two-edged sword. 5. Your Business May Be Your Accountant’s Biggest Annuity. Not only may family and friends get their paycheck under your signature, but so do various professional advisors. This can create (potential) conflicts of interest. Just be alert. If outside advisors find their “rice bowls” threatened, then they may drag their feet or at least be less than helpful. The original article goes into much more detail, with even a bit more brow-beating. Bottom line: the sale of your business is fraught with many challenges. Proper planning is key to navigating them successfully.

Reference: Forbes (September 3, 2013) “The 5 Things Entrepreneurs Must Know When Selling A Business”

For more information, see www.jerryreiflawyer.com

 

 

Easing The Tax Bite When Selling Your Business Saginaw, MI

Is any of your personal wealth tied up in your business? Well, for some people, the business is their current life, both in time and wealth. Consequently, it can be an especially rude shock to see so much of that wealth snatched away in taxes paid upon the sale of that business. The tax bite is a bit bigger these days, too. So, whatever you can do to shelter the business sale from taxation can mean a world of difference for your retirement and even for the whole family. Turns out there are more than a few important tools at your disposal. First, why is the tax bite bigger these days? The American Taxpayer Relief Act of 2012 (ATRA) befriended a new surtax added through Obamacare and this friendship brought the capital gains tax up from last year’s 15% to 20%, or even a whopping 23.8% for some earners. But wait, there’s more. An extra provision of ATRA is set to add yet another 1.2% as of the new year. Then add state taxes. It just adds up, and that is really bad math for you. So what are some tools and ways to lessen the tax bite? Depending on your business, your needs, and your timeline, consider three tested tools discussed in a recent Forbes article titled “Selling Your Business? 3 Ways To Cut The Tax Bite.” While you will want to read the original article, here are the three ways: • The ESOP Plan, • The Qualified Small Business Stock Plan, and • The C-to-S Corporation Conversion Plan. Essentially, the plan (as far as capital gains taxes) is to either find a way to defer the taxation until you leave assets to your heirs (to secure the capital gains eliminating stepped-up basis), to fall under a discounted category, or to actually change the form of the business so as to skate right below that low ceiling. There are a few more ways of doing any one or all of these steps cleanly and efficiently, especially with those with the foresight to plan well in advance.

Reference: Forbes (September 6, 2013) “Selling Your Business? 3 Ways To Cut The Tax Bite”

For more information, see www.jerryreiflawyer.com

 

 

Business Succession – A Lesson From The Royals Mid-Michigan

Likely you have seen and maybe read a steady stream of articles on the subject of “business succession.” As the demographics reveal, there is a tidal wave of aging baby boomer business owners who will be passing the baton by design or by default. The latter is a much messier affair than the former. If you are a baby boomer business owner, then consider a family that has some real life experience in managing successful successions – the Royal Family. For some royal perspective and thoughts on the young Prince George Alexander Louis (the instant media darling and infant son of Prince William and Kate Middleton), WealthManagement.com recently offered an article titled “A Lesson from the Royals: Succession Is a Two-Way Street.” Succession really is a two way street. In one lane, it is the king stepping down to name his successor. In the other lane, it is his successor seeking to prove himself worthy to be the king. The principal is the same in business, and yes, even in small family businesses. The perennial problem is that a business requires tested leadership and ability. Unfortunately, real life experience is a very difficult thing to acquire until you are actually holding the reins. That noted, few business owners are comfortable handing over reins even to their own successors. If you are a would-be-king, then there are some principles to learn to prove yourself, to stand out, and to step up to the task on your own. Fortunately, the original article offers some practical advice. And then there is the other side. As the current business owner – king of all you oversee – you also need to be mindful to give your successor some “playing time” while you can coach them. The actual act of transferring the business can be complicated, for reasons legal and financial. As with any “dance,” timing is key. If your family business is worth keeping afloat, then the successful succession of its leadership is as great a goal worthy of your time and focus. The Owner has retired; God save the Owner.

Reference: WealthManagement.com (August 30, 2013) “A Lesson from the Royals: Succession Is a Two-Way Street”

For more information, see www.jerryreiflawyer.com

 

Successful Successions Require Planning Saginaw, MI

It was the best of business successions; it was the worst of business successions. There is a right way to sell the business to your own managers or your own family members, and then there is a wrong way. Since you cannot live long enough to make all of life’s mistakes, then it is wise to learn from the mistakes of others. In this spirit, consider a recent article in The New York Times titled “The Wrong Way to Sell a Business.” Essentially, there are two types of owners when it comes to the sale or succession of their business. First, there is the one who knows they will sell the business, but procrastinates all the way up to the bitter end. This is not the owner/manager to emulate, and the article showcases a proof-positive example. While you might think your managers are ready and willing to buy your business, they may have other ideas. Regardless, they likely will need time to acquire the capital and then structure their affairs accordingly. If nothing else, managers are not owners until they start thinking of themselves as such, and a bit of lead time can instill such a feeling. But what about the other type of owner? Again, the article provides an example of an owner/manager who has a very decided life-goal in place and can therefore work to instill life-goals in his managers. Accordingly, if you plan for yourself, and allow your managers to plan for themselves, then you can train managers who can transition into becoming owners. When the succession planning is successful, the transition is almost nothing more than economics. True, sometimes these transitions just do not work out, but it is rarely out of an abundance of planning or understanding. Instead, more than a few deals fall apart simply because they are all too sudden and unplanned.

Reference: The New York Time (August 29, 2013) “The Wrong Way to Sell a Business”

For more information, see www.jerryreiflawyer.com

 

Business Succession – A Lesson From The Royals Saginaw, MI

Likely you have seen and maybe read a steady stream of articles on the subject of “business succession.” As the demographics reveal, there is a tidal wave of aging baby boomer business owners who will be passing the baton by design or by default. The latter is a much messier affair than the former. If you are a baby boomer business owner, then consider a family that has some real life experience in managing successful successions – the Royal Family. For some royal perspective and thoughts on the young Prince George Alexander Louis (the instant media darling and infant son of Prince William and Kate Middleton), WealthManagement.com recently offered an article titled “A Lesson from the Royals: Succession Is a Two-Way Street.” Succession really is a two way street. In one lane, it is the king stepping down to name his successor. In the other lane, it is his successor seeking to prove himself worthy to be the king. The principal is the same in business, and yes, even in small family businesses. The perennial problem is that a business requires tested leadership and ability. Unfortunately, real life experience is a very difficult thing to acquire until you are actually holding the reins. That noted, few business owners are comfortable handing over reins even to their own successors. If you are a would-be-king, then there are some principles to learn to prove yourself, to stand out, and to step up to the task on your own. Fortunately, the original article offers some practical advice. And then there is the other side. As the current business owner – king of all you oversee – you also need to be mindful to give your successor some “playing time” while you can coach them. The actual act of transferring the business can be complicated, for reasons legal and financial. As with any “dance,” timing is key. If your family business is worth keeping afloat, then the successful succession of its leadership is as great a goal worthy of your time and focus. The Owner has retired; God save the Owner.

Reference: WealthManagement.com (August 30, 2013) “A Lesson from the Royals: Succession Is a Two-Way Street”

For more information, see www.jerryreiflawyer.com

 

Successful Successions Require Planning Mid-Michigan

It was the best of business successions; it was the worst of business successions. There is a right way to sell the business to your own managers or your own family members, and then there is a wrong way. Since you cannot live long enough to make all of life’s mistakes, then it is wise to learn from the mistakes of others. In this spirit, consider a recent article in The New York Times titled “The Wrong Way to Sell a Business.” Essentially, there are two types of owners when it comes to the sale or succession of their business. First, there is the one who knows they will sell the business, but procrastinates all the way up to the bitter end. This is not the owner/manager to emulate, and the article showcases a proof-positive example. While you might think your managers are ready and willing to buy your business, they may have other ideas. Regardless, they likely will need time to acquire the capital and then structure their affairs accordingly. If nothing else, managers are not owners until they start thinking of themselves as such, and a bit of lead time can instill such a feeling. But what about the other type of owner? Again, the article provides an example of an owner/manager who has a very decided life-goal in place and can therefore work to instill life-goals in his managers. Accordingly, if you plan for yourself, and allow your managers to plan for themselves, then you can train managers who can transition into becoming owners. When the succession planning is successful, the transition is almost nothing more than economics. True, sometimes these transitions just do not work out, but it is rarely out of an abundance of planning or understanding. Instead, more than a few deals fall apart simply because they are all too sudden and unplanned.

Reference: The New York Time (August 29, 2013) “The Wrong Way to Sell a Business”

For more information, see www.jerryreiflawyer.com

 

 

Entrepreneurs Asking For An Early Inheritance Saginaw MI

If your parents are retiring or already retired, then likely they will need their own retirement savings to maintain their lifestyle. On the other hand, as an entrepreneur you might be on the verge of rolling out the next big thing in the marketplace. Should you ask your folks for an early inheritance? The Wall Street Journal considered this matter in an article titled “Cash-Strapped Entrepreneurs Seek Early Inheritances,” with ideas for parents and their entrepreneurial heirs alike. In an economy starting to show some signs of life, many business plans that have been mothballed are being reconsidered. As an heir, is it ok to want your inheritance now? As a parent, is it ok to give it up early? Well, yes to both. All parties concerned must be mindful of tax issues, as well as future financial needs that include planning for retirement, old age, health issues and even the rest of the estate. The original article explores the emotional aspects of this issue, too. Indeed, it can be difficult to ask for an early inheritance and, conversely, it can be difficult being asked for an early inheritance. Regardless, whether you are asking or being asked, you will need competent legal, accounting and financial counsel to guide you. You do not want the potentially competing dreams of business success and a secure retirement to turn into nightmares for all concerned.

Reference: The Wall Street Journal (August 19, 2013) “Cash-Strapped Entrepreneurs Seek Early Inheritances”

For more information, see www.jerryreiflawyer.com

 

Business Owner Bankruptcy Pointers Mid Michigan

Your business is your business and, likely, an important part of your life. That includes your personal financial life, too. When the liabilities of your business become your personal liabilities, then your business and personal lives can get pretty complicated. Small business owners know more than anyone about the realities of bankruptcy, either in the form or near-misses or through personal experience. Consequently, no one needs to protect their assets quite as thoroughly or understand bankruptcy like a small business owner. If you cannot imagine and bear the consequences of a personal bankruptcy then perhaps you should not start a business. Such was the advice in a recent Forbes article titled “How To Bounce Back From Bankruptcy & The Loss Of Your Home.” There original article offers some practical steps to help understand the mechanics of bankruptcy – such as who, what, where, why, when and how – but the most important things to understand are the exemptions. Certain aspects of your personal financial life are legally protected under state laws, even in the face of so many liabilities and debts. You should plan accordingly. For example, most states offer a homestead exemption from bankruptcy that will save your home from liquidation to creditors, unless of course you have mortgaged the home. There are other ways to lose the homestead protection that are less obvious, too. Knowing your protections can enable you to structure your business and operations to protect your interests, and indeed there is much that can be done. At the most basic level, even the choice of form for your business (Limited Liability Company, Corporation, etc.) can have important ramifications to understand. Regardless, the time to make plans to protect your personal assets from your business liabilities is now, rather than later.

Reference: Forbes (August 5, 2013) “How To Bounce Back From Bankruptcy & The Loss Of Your Home”

For more information, see www.jerryreiflawyer.com

Is Your Business Your Retirement Nest Egg, Too? Saginaw, MI

As a business owner, your business and your life are pretty hard to separate. Your business partner or right-hand employee may be a spouse, a sibling or that college roommate. Chances are your assets are entirely bound up in the company, and you might even intend to sell the business to fund your entire retirement. Not so fast! This was the advice given in a recent New York Times article titled “Sell a Business to Cover Retirement? Don’t Count on It.” When it comes to your business, you might be OK with the idea that it is empowering your financial life (or is it your life that is empowering the business itself?). Regardless, there will come a time when you and the business must part. This will be one of the most important events in your life and in the life of your business. Question: will this even be planned or just happen? If the business is your greatest asset, you are just going to sell it and live comfortably in retirement, right? Perhaps. What if it is not worth as much in the market as it is in your mind? If the business is your principal retirement asset, then knowing its value and preparing it for the transition is of utmost importance. This transaction will determine your future well-being, and perhaps the future well-being of your entire family for a long time. Accordingly, this transition will take structuring and forethought. Will your business be your retirement? If yes, then it is never too early to structure the transaction.

Reference: The New York Times (July 24, 2013) “Sell a Business to Cover Retirement? Don’t Count on It”

For more information, see www.jerryreiflawyer.com

 

Business Succession Success Hinges On Succession Planning Saginaw, MI

Closely-held businesses are just not like other assets. You have to think differently about how you are going to pass them along through the family or make other arrangements. In other words, when a family business is part of the mix, you do not have the luxury of mere planning your estate. No, you must plan for the business succession. What if you do not make plans for your estate or the business? Well, it gets messy. Generally, matters default to the probate court to sort things out. Sometimes this sorting depends on dusty state laws of “intestate succession” that provide a one-size-fits-all plan of distribution based on your “degrees” of family relationships. In the absence of proper legal planning, the question likely is whether the family (let alone business) will survive the process. For more on this subject, you might want to read a recent article in The New York Times titled “Surviving a Succession Without a Plan.” The original story is, in many ways, a happy one. The family rises up to reclaim the business and it returns. That said, it is a story of two sisters. While these were very capable sisters, they were never brought up in the business or with the goal of running the business. To save the business, however, these sisters had to fight through an inter-family conflict, a rebellious employee and even a downward dive into the red before finally taking over and saving the business. Unfortunately, the sisters could have been spared all of this anguish had their father simply created a succession plan.

Reference: The New York Times – You’re The Boss (June 25, 2013) “Surviving a Succession Without a Plan”

For more information, see www.jerryreiflawyer.com

 

Business Succession Success Hinges On Succession Planning Saginaw MI

Closely-held businesses are just not like other assets. You have to think differently about how you are going to pass them along through the family or make other arrangements. In other words, when a family business is part of the mix, you do not have the luxury of mere planning your estate. No, you must plan for the business succession. What if you do not make plans for your estate or the business? Well, it gets messy. Generally, matters default to the probate court to sort things out. Sometimes this sorting depends on dusty state laws of “intestate succession” that provide a one-size-fits-all plan of distribution based on your “degrees” of family relationships. In the absence of proper legal planning, the question likely is whether the family (let alone business) will survive the process. For more on this subject, you might want to read a recent article in The New York Times titled “Surviving a Succession Without a Plan.” The original story is, in many ways, a happy one. The family rises up to reclaim the business and it returns. That said, it is a story of two sisters. While these were very capable sisters, they were never brought up in the business or with the goal of running the business. To save the business, however, these sisters had to fight through an inter-family conflict, a rebellious employee and even a downward dive into the red before finally taking over and saving the business. Unfortunately, the sisters could have been spared all of this anguish had their father simply created a succession plan.

Reference: The New York Times – You’re The Boss (June 25, 2013) “Surviving a Succession Without a Plan”

For more information, see www.JerryReifLawyer.com

 

Employee Skin In The Game – Family Business Stock Great Lakes Bay Region, MI

Some businesses are family owned, but not run by members of the family. So, how do you make such non-family key employees act like they are owners? Give them skin in the game. The most common form of “skin” in the game is company stock. Done right, this approach can be a win-win for all parties involved. That said, great caution is due; beware, as described in a recent WealthManagement.com article titled “The Tyranny of Minority Shareholders.” Structuring your family business for the future is not an easy task. What of value in life is? While each company and family is different, making a key employee a part owner certainly can give them added incentive to run things when the family cannot or will not. On the downside, you can create tension between the family owners and the key employee turned minority shareholder. For example, conflicts can arise should the majority owners (i.e., the family members) take actions in their own self-interests without considering the concerns of the minority owners (i.e., non-family members). In some cases, a minority shareholder can be protected by state and federal laws as in the case discussed in the original article regarding the Empire State Building IPO. Even if you do not own an international landmark, there are many ways you, your family, your non-family executives, and, yes, your business, can find a happy medium. However, it takes time and qualified counsel to structure things correctly.

Reference: WealthManagement.com (June 20, 2013) “The Tyranny of Minority Shareholders”

For more information, see www.jerryreiflawyer.com

 

 

Business Succession Success Hinges On Succession Planning Saginaw, MI

Closely-held businesses are just not like other assets. You have to think differently about how you are going to pass them along through the family or make other arrangements. In other words, when a family business is part of the mix, you do not have the luxury of mere planning your estate. No, you must plan for the business succession. What if you do not make plans for your estate or the business? Well, it gets messy. Generally, matters default to the probate court to sort things out. Sometimes this sorting depends on dusty state laws of “intestate succession” that provide a one-size-fits-all plan of distribution based on your “degrees” of family relationships. In the absence of proper legal planning, the question likely is whether the family (let alone business) will survive the process. For more on this subject, you might want to read a recent article in The New York Times titled “Surviving a Succession Without a Plan.” The original story is, in many ways, a happy one. The family rises up to reclaim the business and it returns. That said, it is a story of two sisters. While these were very capable sisters, they were never brought up in the business or with the goal of running the business. To save the business, however, these sisters had to fight through an inter-family conflict, a rebellious employee and even a downward dive into the red before finally taking over and saving the business. Unfortunately, the sisters could have been spared all of this anguish had their father simply created a succession plan.

Reference: The New York Times – You’re The Boss (June 25, 2013) “Surviving a Succession Without a Plan”

 For more information, see www.jerryreiflawyer.com

Dementia – Plan Now To Avoid Problems Later Saginaw, MI

Dementia is not really a disease in the classical sense. There is no healthy one minute, then sick the next progression. No, dementia is just a slow and barely perceptible decline. Unfortunately, decline is hard to understand. So, when is an individual in decline and when are financial decisions still safe? A recent Forbes article titled “Aging Parents, Dementia And Financial Decisions: What Is Safe?” chronicles the story of one family and family business against the backdrop of dementia and decline. In truth, there is no real test because dementia and financial choices simply do not avail themselves to conclusive testing. That said, it is essential that family members be steadily involved, understanding, and concerned. “Mara” in the original article is a perfect example. Because Mara was involved, understanding and concerned, she was able to spot the “signs” of dementia before her mother lost the family business and estate due to poor decisions, increasing confusion and perhaps even those willing to take advantage of the situation. In the end, Mara not only had to spot the signs, she also had to get the help and coordination of a doctor to step in and assist. Much stress and strain resulting from dementia later on can be preemptively eliminated by proper legal planning right now. Be sure to consult with qualified legal counsel to ensure that you, your loved ones and your assets are protected.

Reference: Forbes (June 26, 2013) “Aging Parents, Dementia And Financial Decisions: What Is Safe?”

For more information, seee www.jerryreiflawyer.com

 

Charging Order Challenges Great Lakes Bay Region Saginaw, MI

Choosing the structure of your business is about more than just taxation. You want a structure that protects you from liabilities of the business itself. In fact, the very structure of your business is a means to protect both you and your business, so it’s worth understanding and maintaining. Have you heard of charging orders? These are legal wedges creditors use to try and drive a wedge between you and your business. If your business is an LLC (Limited Liability Company) or an LP (Limited Partnership), then there is more you should know about charging orders, as detailed in a recent Forbes article titled “The Misunderstood Charging Order.” While this is a complex subject, basically a charging order is a creditor’s first and last tool to extract your interests and capital from your business (assuming they don’t try to pierce the veil). In a corporation, a charging order can allow a creditor to actually gain a debtor’s stock interests in the business. This can be disastrous. “Limited” company structures are specifically designed with charging order protection, something that could be important to you as a business owner. The original article goes into greater detail, but essentially the charging order protection means that while a creditor can place a lien on your LLC membership interests and claim any distributions, a creditor cannot claim the membership interest itself and sabotage the business. Certainly there is much more to know on the subject of asset protection, to include the subject of company structure. Although some of this discussion can become tediously academic, it’s important to understand where and how your asset protection vulnerabilities can arise.

Reference: Forbes (April 30, 2013) “The Misunderstood Charging Order”

For more information, see www.jerryreiflawyer.com

 

The ESOP Way to Business Succession Win-Win

In the alphabet soup of company forms (S-Corp, C-Corp, LLC, LLP, LP, LTD., and so on and so forth) there is a growing turn toward a slightly more obscure acronym: the ESOP. So, what is an ESOP, what can it do, and is it right for your business? ESOPs, or Employee Stock Ownership Plans, are a tricky breed. Essentially, an ESOP is a tool recently highlighted by Congress and featured by The Wall Street Journal in an article titled “Founders Cash Out, but Do Workers Gain?” Planning to exit a business is all about doing one of two things; either restructuring the business or selling it outright. With an ESOP you accomplish both goals and build the company around the very employees that compose the company in the first place. Rather than going out and hunting for a buyer, the employees become vested in the stock ownership of their own company. In turn, the ownership stake simultaneously becomes a retirement asset while the ownership of the founder is bought out. Now, if you are already familiar with this approach, it may be worth reading the original article since there are certain limitations affecting the employees-turned-owners. The article gives examples of how an ESOP can work a win-win for all concerned under the right circumstances. These examples include Bob’s Red Mill, for example, or, from a different industry, Manson Construction Co. ESOPS have been a powerful tool in an otherwise soft market for business transfers. Accordingly, ESOPS are worth a good look, and then even a second look, as a unique and proven business succession strategy.

Reference: The Wall Street Journal (April 17, 2013) “Founders Cash Out, but Do Workers Gain?”

For more information, see www.jerryreiflawyer.com

 

 

The ESOP Way to Business Succession Win-Win Saginaw, Michigan

In the alphabet soup of company forms (S-Corp, C-Corp, LLC, LLP, LP, LTD., and so on and so forth) there is a growing turn toward a slightly more obscure acronym: the ESOP. So, what is an ESOP, what can it do, and is it right for your business? ESOPs, or Employee Stock Ownership Plans, are a tricky breed. Essentially, an ESOP is a tool recently highlighted by Congress and featured by The Wall Street Journal in an article titled “Founders Cash Out, but Do Workers Gain?” Planning to exit a business is all about doing one of two things; either restructuring the business or selling it outright. With an ESOP you accomplish both goals and build the company around the very employees that compose the company in the first place. Rather than going out and hunting for a buyer, the employees become vested in the stock ownership of their own company. In turn, the ownership stake simultaneously becomes a retirement asset while the ownership of the founder is bought out. Now, if you are already familiar with this approach, it may be worth reading the original article since there are certain limitations affecting the employees-turned-owners. The article gives examples of how an ESOP can work a win-win for all concerned under the right circumstances. These examples include Bob’s Red Mill, for example, or, from a different industry, Manson Construction Co. ESOPS have been a powerful tool in an otherwise soft market for business transfers. Accordingly, ESOPS are worth a good look, and then even a second look, as a unique and proven business succession strategy.

Reference: The Wall Street
Journal (April 17, 2013) “Founders Cash Out, but Do Workers Gain?”

For more information, see www.jerryreiflawyer.com

 

Exiting Your Business on Your Own Terms Saginaw, Michigan

Exit planning for your small business isn’t like a light switch – there is no simple on/off switch when it comes to control or ownership. It took time to build the business the right way and so it will also take proper time and planning to leave it on your own terms. Fortunately, you can structure your exit in such a way that you can lay the foundations to flip the switch in the future while retaining management control today. So, how do you structure the business so that you can start succession while still sitting on the throne? A recent Forbes article titled “How To Retain Control, Even As You Exit” provides some practical advice. At the most basic level, you may want to adjust the structure of the business itself. Is it an LLC? If yes, then retain control by making it a “manager-managed” LLC and retain the management position. Is it a corporation? If yes, then there are more options. For instance, you could issue various types of stock, either in different classes (voting vs. non-voting), or even offer restricted stock that becomes vested only upon certain conditions. The corporate structure also offers other powerful tools like Employee Stock Ownership Purchase (ESOP) arrangements. Your approach and the timing of your exit will depend on other factors, not the least of which hinges on your successors. When will they be ready to assume more control? Even more important, when will you be ready to begin relinquishing control? More often than not, you can structure an exit so both control and financial gain slowly adjust to everyone’s benefit, but you have to start with a plan.

Reference: Forbes (April
10, 2013) “How To Retain Control, Even As You Exit”

For more information, see www.jerryreiflawyer.com

 

Related articles

Exiting Your Business on Your Own Terms

Exiting Your Business on Your Own Terms Saginaw, Michigan

Exit planning for your small business isn’t like a light switch – there is no simple on/off switch when it comes to control or ownership. It took time to build the business the right way and so it will also take proper time and planning to leave it on your own terms. Fortunately, you can structure your exit in such a way that you can lay the foundations to flip the switch in the future while retaining management control today. So, how do you structure the business so that you can start succession while still sitting on the throne? A recent Forbes article titled “How To Retain Control, Even As You Exit” provides some practical advice. At the most basic level, you may want to adjust the structure of the business itself. Is it an LLC? If yes, then retain control by making it a “manager-managed” LLC and retain the management position. Is it a corporation? If yes, then there are more options. For instance, you could issue various types of stock, either in different classes (voting vs. non-voting), or even offer restricted stock that becomes vested only upon certain conditions. The corporate structure also offers other powerful tools like Employee Stock Ownership Purchase (ESOP) arrangements. Your approach and the timing of your exit will depend on other factors, not the least of which hinges on your successors. When will they be ready to assume more control? Even more important, when will you be ready to begin relinquishing control? More often than not, you can structure an exit so both control and financial gain slowly adjust to everyone’s benefit, but you have to start with a plan.

Reference: Forbes (April
10, 2013) “How To Retain Control, Even As You Exit”

For more information, see www.jerryreiflawyer.com

 

Exiting Your Business on Your Own Terms

Exit planning for your small business isn’t like a light switch – there is no simple on/off switch when it comes to control or ownership. It took time to build the business the right way and so it will also take proper time and planning to leave it on your own terms. Fortunately, you can structure your exit in such a way that you can lay the foundations to flip the switch in the future while retaining management control today. So, how do you structure the business so that you can start succession while still sitting on the throne? A recent Forbes article titled “How To Retain Control, Even As You Exit” provides some practical advice. At the most basic level, you may want to adjust the structure of the business itself. Is it an LLC? If yes, then retain control by making it a “manager-managed” LLC and retain the management position. Is it a corporation? If yes, then there are more options. For instance, you could issue various types of stock, either in different classes (voting vs. non-voting), or even offer restricted stock that becomes vested only upon certain conditions. The corporate structure also offers other powerful tools like Employee Stock Ownership Purchase (ESOP) arrangements. Your approach and the timing of your exit will depend on other factors, not the least of which hinges on your successors. When will they be ready to assume more control? Even more important, when will you be ready to begin relinquishing control? More often than not, you can structure an exit so both control and financial gain slowly adjust to everyone’s benefit, but you have to start with a plan.

Reference: Forbes (April
10, 2013) “How To Retain Control, Even As You Exit”

For more information, see www.jerryreiflawyercom

 

 

Business Succession – Have a Business “Hold” Your Business Saginaw, Michigan

When it comes to transferring a family business, there are quite a few ways to skin the proverbial cat. However, coming out ahead of the taxman is only one of the challenges you will face. Businesses exist on paper. Lots of it. Stationary letterhead, marketing materials, and the accounting books are the papers that may come to mind first. Nevertheless, don’t forget the all-too-often ignored “company books!” They provide the foundation and the structure of the business itself. Considering the form and structure of the business can be vitally important when planning to give the business to the next generation. In addition, you should be mindful of its current operations and even the value of the business. None other than The New York Times took up this issue in a recent article titled “Modern Safeguards for a Family-Owned Business.” The article offers an excellent introduction to the time-honored idea of a holding company. In short, a family can own a company by owning the company that owns that very company. Did you follow that? Said another way, while professional management can take care of the day-to-day operations of the business, the owning family can come together to exercise control over the higher entity – the holding company. If you’re no stranger to corporate structuring, then this is a familiar idea. Regardless, you never may have considered its application in terms of your own business and the family ownership. For many, this kind of structuring can be a first step in an overall succession plan for the business without finalizing the precise terms of the succession. Be sure to consult with competent legal counsel, as this is not a do-it-yourself project.

Reference: The New York Times (February 15, 2013) “Modern Safeguards for a Family-Owned Business”

For more information, see www.jerryreiflawyer.com

 

Business Succession – Have a Business “Hold” Your Business Saginaw, Michigan

When it comes to transferring a family business, there are quite a few ways to skin the proverbial cat. However, coming out ahead of the taxman is only one of the challenges you will face. Businesses exist on paper. Lots of it. Stationary letterhead, marketing materials, and the accounting books are the papers that may come to mind first. Nevertheless, don’t forget the all-too-often ignored “company books!” They provide the foundation and the structure of the business itself. Considering the form and structure of the business can be vitally important when planning to give the business to the next generation. In addition, you should be mindful of its current operations and even the value of the business. None other than The New York Times took up this issue in a recent article titled “Modern Safeguards for a Family-Owned Business.” The article offers an excellent introduction to the time-honored idea of a holding company. In short, a family can own a company by owning the company that owns that very company. Did you follow that? Said another way, while professional management can take care of the day-to-day operations of the business, the owning family can come together to exercise control over the higher entity – the holding company. If you’re no stranger to corporate structuring, then this is a familiar idea. Regardless, you never may have considered its application in terms of your own business and the family ownership. For many, this kind of structuring can be a first step in an overall succession plan for the business without finalizing the precise terms of the succession. Be sure to consult with competent legal counsel, as this is not a do-it-yourself project.

Reference: The New York Times (February 15, 2013) “Modern Safeguards for a Family-Owned Business”

For more information, see www.jerryreiflawyer.com

 

Do You Know the Value of Your Business?

What is your business worth to you? What is your business worth to a potential buyer? These are two entirely different questions. As a business owner, you should be able to answer both questions fully and truthfully. In other words, you should know the value of your greatest asset and boldest venture, both personally and on the open market, because there may come a day when you need to sell or pass down the business. Knowing the numbers today can also help make you a better manager. Valuations are difficult for business owners because there are so many variables to the process. That said, the ability of a business owner to fully understand their business from the outside – as the owner of an asset or as a prospector on the market – rather than from within the immediacy of running the business, is fundamentally important to managing the business well today and in the future. According to The New York Times, business owners are increasingly coming to terms with these issues. Their recent article, “Do You Know What Your Business Is Worth? You Should,” suggests that while most business owners put off getting a valuation until a sale is imminent, many are starting to treat the act of valuing their business as an integral part of running it. For example, valuations -- whether performed by your accountant on an annual basis or with the assistance of sophisticated software tools -- can help business owners pinpoint management practices that may be undermining business value. Isolating those variables, and acting on them, can drive your valuation higher. Tax time is a great opportunity for you as a business owner to crunch numbers with your tax adviser and start getting a handle on the true value of your business ... and some ideas for improvement.

Reference: The New York Times (January 30, 2013) “Do You Know What Your Business Is Worth? You Should”

For more information, see www.jerryreiflawyer.com

 

Business Succession – Have a Business “Hold” Your Business Saginaw, Michigan

When it comes to transferring a family business, there are quite a few ways to skin the proverbial cat. However, coming out ahead of the taxman is only one of the challenges you will face. Businesses exist on paper. Lots of it. Stationary letterhead, marketing materials, and the accounting books are the papers that may come to mind first. Nevertheless, don’t forget the all-too-often ignored “company books!” They provide the foundation and the structure of the business itself. Considering the form and structure of the business can be vitally important when planning to give the business to the next generation. In addition, you should be mindful of its current operations and even the value of the business. None other than The New York Times took up this issue in a recent article titled “Modern Safeguards for a Family-Owned Business.” The article offers an excellent introduction to the time-honored idea of a holding company. In short, a family can own a company by owning the company that owns that very company. Did you follow that? Said another way, while professional management can take care of the day-to-day operations of the business, the owning family can come together to exercise control over the higher entity – the holding company. If you’re no stranger to corporate structuring, then this is a familiar idea. Regardless, you never may have considered its application in terms of your own business and the family ownership. For many, this kind of structuring can be a first step in an overall succession plan for the business without finalizing the precise terms of the succession. Be sure to consult with competent legal counsel, as this is not a do-it-yourself project.

Reference: The New York Times (February 15, 2013) “Modern Safeguards for a Family-Owned Business”

For more information, see www.jerryreiflawyer.com

 

Mind the Details – Property Insurance Coverage and Estate Planning Saginaw, Michigan

Estate planning is more than creating a tool chest for wealth transfers. There must be careful coordination between many moving parts. For example, if you fail to mind the details of your insurance planning, then your estate planning tools may do more harm than good. A recent article in AdvisorOne provides a good reminder of the need to take care of the details when constructing your estate plan. The article, titled “Trusts and LLCs: Smart Ways to Transfer Wealth and Risk, but Mind the Details,” uses the example of trusts and LLCs to illustrate how even the best intended planning can go astray. These common entities are often used by estate planning attorneys to protect client assets from probate and creditors, and they are also used to transfer the assets to loved ones after death. Unfortunately, unless the assets are properly retitled, the full benefit of the planning may not be realized. In addition, unless various insurance carriers are notified that the trust or LLC is now under a new owner (or additional insured), there may be challenges in the event of a future claim. Example: if the family home is transferred into a Qualified Personal Residence Trust (QPRT), but the property casualty policy is not updated to reflect this transfer. Insurance is underwritten with the listed owner in mind. If you transfer an insured asset to a legal entity, then you might invalidate the insurance coverage. The point is that there are no half-measures in planning for your estate. Perhaps this might be a good time to review your assets, your estate planning and your insurance coverage?

Reference: AdvisorOne (February 21, 2013) “Trusts and LLCs: Smart Ways to Transfer Wealth and Risk, but Mind the Details”

For more information, see www.jerryreiflawyer.com

 

Business Succession – Have a Business “Hold” Your Business Saginaw, Michigan

When it comes to transferring a family business, there are quite a few ways to skin the proverbial cat. However, coming out ahead of the taxman is only one of the challenges you will face. Businesses exist on paper. Lots of it. Stationary letterhead, marketing materials, and the accounting books are the papers that may come to mind first. Nevertheless, don’t forget the all-too-often ignored “company books!” They provide the foundation and the structure of the business itself. Considering the form and structure of the business can be vitally important when planning to give the business to the next generation. In addition, you should be mindful of its current operations and even the value of the business. None other than The New York Times took up this issue in a recent article titled “Modern Safeguards for a Family-Owned Business.” The article offers an excellent introduction to the time-honored idea of a holding company. In short, a family can own a company by owning the company that owns that very company. Did you follow that? Said another way, while professional management can take care of the day-to-day operations of the business, the owning family can come together to exercise control over the higher entity – the holding company. If you’re no stranger to corporate structuring, then this is a familiar idea. Regardless, you never may have considered its application in terms of your own business and the family ownership. For many, this kind of structuring can be a first step in an overall succession plan for the business without finalizing the precise terms of the succession. Be sure to consult with competent legal counsel, as this is not a do-it-yourself project.

Reference: The New York Times (February 15, 2013) “Modern Safeguards for a Family-Owned Business”

For more information, see www.jerryreiflawyer.com

 

Do You Know the Value of Your Business? Saginaw, Michigan

What is your business worth to you? What is your business worth to a potential buyer? These are two entirely different questions. As a business owner, you should be able to answer both questions fully and truthfully. In other words, you should know the value of your greatest asset and boldest venture, both personally and on the open market, because there may come a day when you need to sell or pass down the business. Knowing the numbers today can also help make you a better manager. Valuations are difficult for business owners because there are so many variables to the process. That said, the ability of a business owner to fully understand their business from the outside – as the owner of an asset or as a prospector on the market – rather than from within the immediacy of running the business, is fundamentally important to managing the business well today and in the future. According to The New York Times, business owners are increasingly coming to terms with these issues. Their recent article, “Do You Know What Your Business Is Worth? You Should,” suggests that while most business owners put off getting a valuation until a sale is imminent, many are starting to treat the act of valuing their business as an integral part of running it. For example, valuations -- whether performed by your accountant on an annual basis or with the assistance of sophisticated software tools -- can help business owners pinpoint management practices that may be undermining business value. Isolating those variables, and acting on them, can drive your valuation higher. Tax time is a great opportunity for you as a business owner to crunch numbers with your tax adviser and start getting a handle on the true value of your business ... and some ideas for improvement.

Reference: The New York Times (January 30, 2013) “Do You Know What Your Business Is Worth? You Should”

For more information, see www.jerryreiflawyer.com

 

Advanced Planning Techniques To Be Targeted? Saginaw, Michigan

With the fiscal cliff standoff behind us, many Americans are content to rest and catch up on their sleep. Some professionals, however, have started to realize that there were some very real questions left on the fiscal cliff table. That’s right – we are approaching a renewed fiscal debate and inevitable revenue-squeezing. While significant estate planning laws are settled, there remain more than a few important estate planning “tools” left hanging in the air. These tools likely will be low-hanging fruit in future discussions. The American Taxpayer Relief Tax Act Of 2012 (ATRA) finally ended some 12 years of estate planning uncertainty (or so we can only hope). The certainty includes such matters as various tax rates and the exemptions amounts for the estate tax, gift tax, and generation-skipping tax. But ATRA didn’t settle many technical questions raised in the past few years, both on and off the campaign trail. So, what issues and devices should we watch? A recent Forbes article titled “Congress May Tighten The Belt On Cute Tax Tricks” lists some sore subjects and possible new areas of taxation. These include: • Grantor Trusts: might just get added back into the Grantor’s estate. • Dynasty Trusts: might just limit the extent of your dynasty. • GRATs: “Grantor Retained Annuity Trusts” (GRATs) might become much more demanding and risky. • Family Limited Partnerships: might become much less valuable as your ability to take discounts is curtailed. The original article is worth your time, especially if you are concerned that future technical rules may swoop in and sully some well-designed estate planning. However, for those conversant with this subject, they will recognize that this talk is nothing new and these estate planning devices have been repeatedly targeted in the past. The takeaway, as always, is to consult qualified legal counsel regarding how future changes in the law may impact your estate planning.

Reference: Forbes (January 16, 2013) “Congress May Tighten The Belt On Cute Tax Tricks”

For more information, see www.jerryreiflawyer.com

Is Your (Business) Succession Secure? Saginaw, Michigan

“Succession” seems to be such an old concept – one that invokes kings, not necessarily entrepreneurs. When it comes to business, however, succession is perhaps the most fundamental concept and object of planning. “In every end is the beginning.” No truer words could be written when it comes to planning the successful succession of a small business. If business succession is on your mind then you will want to read a recent Forbes article titled “How to Succeed At Succession.” Before you read the original article, remember this – the questions are as important (if not more so) than the answers. So, what kinds of questions should you be asking yourself? Here are a few to ponder: Do you want the business to live on past you? Who ought to lead it? What is the business in the context of your own estate or the estates of your partners? Do you have an exit strategy in the event of retirement, disability or death? In the end, make sure you consult appropriate legal counsel. This area of planning is not a do-it-yourself project.

Reference: Forbes (January 15, 2013) “How to Succeed At Succession”

For more information, see www.jerryreiflawyer.com

 

 

Is Your (Business) Succession Secure? Saginaw, Michigan

to step back and stay back. “Succession” seems to be such an old concept – one that invokes kings, not necessarily entrepreneurs. When it comes to business, however, succession is perhaps the most fundamental concept and object of planning. “In every end is the beginning.” No truer words could be written when it comes to planning the successful succession of a small business. If business succession is on your mind then you will want to read a recent Forbes article titled “How to Succeed At Succession.” Before you read the original article, remember this – the questions are as important (if not more so) than the answers. So, what kinds of questions should you be asking yourself? Here are a few to ponder: Do you want the business to live on past you? Who ought to lead it? What is the business in the context of your own estate or the estates of your partners? Do you have an exit strategy in the event of retirement, disability or death? In the end, make sure you consult appropriate legal counsel. This area of planning is not a do-it-yourself project.

Reference: Forbes (January 15, 2013) “How to Succeed At Succession”

For more information, see www.jerryreiflawyer.com

 

Business Succession Rejections by Heirs

When it comes to the succession plans of a family business, there are many things to ponder when selecting an heir. Important attributes like responsibility, work ethic, and leadership are taken into consideration when deciding who choose for the business. One thing that you may have left out is what to do if your heir turns down the offer to take over the family business. Then what? If you are a family business owner, are you intending to keep the business in the family even as you step down from control? Have you considered the possibility of designating an heir who does not want the family business and do you have a “Plan B” to adjust your succession plans accordingly? The reasons why an heir may resist taking up the reins to the family business are many facetted, but that doesn’t necessarily mean they are making a final, informed decision. No, it may take time, talk, and some understanding, and there are lessons to be gleaned from a recent Forbes article on the subject titled “5 Ways Family Business Founders Can Change A "Made Up" Mind.” Deciding on a successor for your business can take patience, time and understanding. This aspect of estate planning isn’t just about your own wishes, but also about the hopes and dreams of your family members and heirs involved.

Reference: Forbes
(September 10, 2012) “5 Ways Family Business Founders Can Change A
"Made Up" Mind”

For more information, see www.jerryreiflawyer.com

 

Tough Retirement Decisions for Small Business Owners

Talk about being kicked when you’re already down. That’s the feeling many small business owners have as they ponder retirement in these tough financial times. Surviving the recession is one thing, but retiring in one seems next to impossible. The Wall Street Journal considered this topic in a recent article aptly titled “'The Economy Stole My Retirement.'” If you are a small business owner on the one hand – a role that requires flexibility and ingenuity – and a baby-boomer on the other, then this recession has been more than a case of terrible timing. No, it’s thrust you into “business purgatory.” Do you find yourself with one foot in management and the other foot (or maybe just that big toe) in the golden sands of retirement? A baby boomer who is a small business owner faces a very tough call right now. Should he or she sell for the best offer today, which is generally the low-ball offer, or hold out for some future value which more accurately reflects what the business is truly worth? A tough call, indeed. For the owners of small businesses and the heads of family businesses, make no mistake about the difficulty of your position. It’s impossible to foretell the future, but since you already know what is most valuable to you (your family and your business), take the time to carefully weigh your options and seek appropriate professional counsel.

Reference: The Wall Street
Journal (September 12, 2012) “'The Economy Stole My Retirement'”

For more information, see www.jerryreiflawyer.com